Microsoft Word Thesis Gent (1). doc

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Charles University 
Faculty of Social Sciences 
Institute of Economic Studies 
MASTER THESIS 
 
 
The impact of macroeconomic factors on financial 
institutions credit risk during the global financial 
crisis, case in Czech Republic 
 
 
 
 
Author: Gent Jusufi 
Supervisor: Mgr. Magda Pečená Ph.D. 
Academic year: 2010/2012 
Prague, May 2012 

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Declaration of Authorship 
The author hereby declares that he compiled this thesis independently, using only the 
listed resources and literature.
The author grants to Charles University permission to reproduce and to distribute 
copies of this thesis document in whole or in part. 
Prague, May__, 2012
Signature_______________. 

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Acknowledgment 
 
This master thesis would not have been possible without the guidance and the help of 
my supervisor who in one way or another contributed and extended her valuable 
assistance in the preparation and completion of this study. 
I would like to express my utmost gratitude to Mgr. Magda Pečená Ph.D, Professor at 
Institute of Economic Studies, Charles University in Prague, for her sincerity, 
encouragement and concern.

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Abstract 
This study aims to estimate the ratio of non-performing loans to total loans (NPL ratio), 
its determinants and its response to different macroeconomic shocks. As the last 
financial crises had negative impact on the economy of many countries of the world, we 
have to strive for preventive measures that would help us to fully or at least partly avoid 
future crises. It should be achieved by sound risk management practices of all financial 
institutions.
Important part of these risk management practices shall be – among others - stress tests 
that would test the health of the institution under severe conditions and negative shocks. 
For this study the vector autoregression model (VAR methodology) is used to see the 
response of credit risk (in terms of NPL ratio) to macroeconomic shocks in the Czech 
Republic. The variables used for this study are quarterly time series data of the period 
from 2002 to 2011 (GDP, inflation rate, unemployment rate, koruna exchange rate 
(CZK/USD), and interest rate). For each of these variables the impulse response 
function was created, to show the impact of macroeconomic shocks and the speed of 
adjustment of NPL ratio to these shocks. 
Keywords: Financial Crises, Credit Risk Management, Non-performing loans, 
Macroeconomic Shocks, Czech Republic, VARs 

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